These words, which appeared in this column about six weeks ago, were written in reference to the boardroom battles now raging at Cooper Motors Corporation (CMC) Holdings, one of the largest motor dealers in this country.

At that time, the Capital Markets Authority (CMA), the market regulator, had suspended trading in CMC shares on the Nairobi Securities Exchange (NSE) following a number of public allegations which had been exchanged between certain past and present members of the CMC board of directors.

Six weeks later, trading in these shares is still suspended and no one now knows exactly when it will resume.

An extra-ordinary general meeting that has been called by one section of the shareholders has been put on hold pending a High Court decision expected this week.

Meanwhile, the firm’s shareholders remain in an uncertain limbo. The shareholders don’t know when trading in their shares will resume nor what their market value will be at that time.

One hopes that our faculties of commerce and departments of business studies are watching this CMC saga very closely, especially now as it heads to the High Court for some critical interpretation and direction on the way forward.

We hope that when the dust finally settles on this saga, a number of critical corporate governance issues will have been clarified. Among some of the most important of these are the following:

One, should the market regulator be allowed to cancel a lawfully convened meeting of the shareholders of a public company following a series of allegations which have not yet been validated before a competent court?

Fall in value

Or, to put this differently, just how far should the market regulator be allowed to go with regard to the internal management of the country’s public companies?

Second, what should be the responsibility of a quoted company’s chief executive with regard to the public disclosure or dissemination of such information regarding the company that directly leads to a substantial fall in the value of that company’s shares or the suspension of trading in them at the securities exchange?

Third, in such cases, whose interests should be considered paramount? Are they the interests of the shareholders, those of the existing board of directors or those of the market regulator?

One of the main reasons why our faculties of commerce should be following up this CMC business as an academic case study is that the market regulator is treading on very uncertain territory here. It has not yet had to deal with a case exactly like this before.

It has no established precedents upon which to repair for learned guidance. One suspects that it is quietly celebrating the fact that this matter is finally coming up before the High Court.

There is one other issue that the CMA needs to consider very carefully before it plunges too far into this CMC business.

If the CMA seeks to stop a lawfully convened extra-ordinary general meeting of a public company such as CMC Holdings, what message is it sending to the country’s corporate fraternity and, especially, to current and prospective international investors?

Will such foreign investors feel safer and more confident setting up business here or investing in existing ventures as a result of the CMA’s latest interventions in this saga? Or will they see this as a thinly-veiled warning that Big Brother, in the form of the CMA, can step into their internal affairs at any time and try and drive them this or the other way?

All markets, including capital markets, generally do not know how to deal with uncertainty.

Because uncertainty generally makes it very difficult for market players to see their way forward, these players tend to resent and avoid all those organs or circumstances that increase their range of uncertainty.

Way forward

When the CMA first closed the trading in CMC shares, it said that trading in those shares would resume in seven days. After those seven days expired, the market regulator switched gears, saying that trading in those shares would not resume until after three months.

Naturally, nobody can now be sure exactly when trading in those shares will resume. If the CMA has postponed the date once, it could postpone it again. With respect to these shares, uncertainty seems to be here to stay.

As the CMC shareholders await the High Court ruling that will clarify the way forward, they must be asking themselves one simple question: If ordinary business at all CMC outlets is continuing normally, why should their shares at the NSE be held under lock and key? Why, indeed?